Small Business Budgeting Tips: Perfecting the Plan That Keeps you On-track

admin | May 21, 2011 | Comments 0

Small Business Budgeting Tips: Perfecting the Plot That Keeps you On-track

At the end of every fiscal year companies tallying up their scores to see how they’ve finished. Unlike the game of golf having the highest score is cause for celebration, being in the black you’ve done well and deserve some congratulations. If there isn’t a soirée going on in your business maybe it’s because you didn’t plot for a year-end party, and that could be the direct upshot of your failure to budget.

To be successful in business, budget cannot be a taboo word in your company. One of the skill sets you as an owner or administrator need to possess is the skill to plot ahead, this includes that skill to budget. If you’re a visionary and lack budgeting skills, then stop reading and go find someone who is. So before we discuss budgeting tips, let’s initially discuss what a budget is and isn’t.

What a Budget Is:

A budget is a proposed plot to monitor financial activity over a period of time. A budget is a plotting tool an owner and/or administrator should be using to measure trends over a fixed gap; this includes inflow, outflow, and asset/ liability growth. Finally a budget is a resource to forecast an assumed outcome.

What a Budget is NOT:

A budget is not the law; it is not to be used as a means of accountability and to ensure financial integrity. A budget is not to be used a ceiling to spending, and a method of resolution control. And finally a budget is not a guarantee so financial and business success.

So now that we have defined what a budget is, let us make to how to properly use and know how a budget really benefits a company.

The budget should be place collectively and approved at smallest amount 1-2 months prior to the initiation of the new fiscal year. This will allow for key employees to look at what the company is trying to accomplish and what is being aimed for. So for this to happen plotting will need to take house approximately 3-6 months before the initiation of the new fiscal year, this of course depends on the difficulty and size of the company.

The budget should reflect the direction that the company is headed in; this of course is handed down by the CEO and/or Board of Directors. Everything about the budget should point towards the strategic plot the company has adopted. The budget should also be multifaceted, not only should you include a Profit & Loss operating budget, but also a Balance Sheet budget to aid track cash inflows and outflows.

Finally the budget should be realistic. An exponential boost in revenues without any foundational proof or purpose can principal to fiscal year failure. Again remember the budget is for mapping out trends in an attempt to forecast growth or decline. All the pieces must fit, in business there is usually a cause for augmented revenues (tip: check for the reason in your expenses section!).

To summarize let’s recap the key points:

1. Budget is not taboo

2. Budget is a proposed plot

3. Budget is not the law

4. Approval should allow for time to disseminate throughout the company

5. Reflects the strategic plot and bearing of the company

6. The budget should be realistic, for all growth there should be a reason